The Old Mercantilism and the New
by Gary North
http://www.lewrockwell.com/north/north551.html
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There are hints that there is a new form of mercantilism coming. China, meaning the People’s Bank of China, purchased 9.9% of the Blackstone hedge fund in May. It paid $3 billion. The PBOC has set up a rumored $300 billion fund for purchasing foreign equities and other unnamed assets. This is a shift from debt to equity, from foreign governments’ promises to pay to actual ownership of foreign companies and assets.
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Does the USA’s empire end “soon”?
We converted from the Revolutionary War America in 1860 with the War of Northern Aggression. We converted from a peaceful country with a bias for isolationism with WW1 that our political class steered us into. We allowed that political class to shoot us in the foot with the Smoot Hawley tariff and mislead us by calling The Great Depression. We were robbed of our sound money by FDR with his socialist agenda. When even that didn’t work, he shoved us into WW2. With that we became an empire. Fast forward six decades later, the “rewards” of these policies, like the proverbial chickens, are coming home to roost.
Is it China that, to use a poker term, “felts us”?
Are they in such a world of hurt that we’re going to be another unfortunate casualty? Of the monetary war to come.
One can envision some of the disastrous consequences of our past excesses.
- The social security insurance timebomb explodes and the youth can’t afford to pay the claims of the old folks.
- The health care bills zoom even further out of sight as the lifespan increases.
- The Arabs start selling oil in the golden dinar as opposed to fiat currencies.
- The Chinese use their reserves to own the resources everyone needs.
The dollar plummets on a fast track to the bottom. Do we, the American people, just abrogate our agreements and return to Constitutional dollars. It would be an “interesting strategy”. I’m not sure how it really unwinds. Does some future President just declare a bank holiday and “go fishing” after making the announcement that the Federal Reserve bank Note is no longer legal tender in the USA. That’s a good strategy. Let the marketplace figure it out. Maybe the Federal Reserve can figure out how it survives without it’s monopoly on money.
So what does the local savings bank do? Run this play out. Depositors are insured by the FDIC to 100k. If the FRBN is no longer money, then the bank’s dollars are in effect worthless. It probably has stocks and bonds. So the FDIC will have to make good on deposits. But clearly everyone is taking a big haircut.
Think about the ante bellum South where you’re rich with a pocket full of Confederate dollars. Or post WW2 Germany with paper marks. Or post WW1 Germany with paper marks. Or modern day Zaire with 1000% annual inflation.
It’s really hard to envision.
How does one prepare for a fiscal tsunami?
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Posted by reinkefj 
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